Why Purchase Property and Casualty Insurance?

insurance continuing educationProperty insurance provides protection against most risks to property, such as fire, theft, and some weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, or boiler insurance. When people   finance a home with a mortgage, their lenders most likely will require them to have home insurance coverage to protect the home in case of damage cause by unforeseen circumstances, such as fires or natural disasters. Continue reading

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Who Needs Business Income Coverage?

insurance continuing educationMany business owners wonder whether they need business income coverage. The following scenario shows what can happen if your business property is damaged by wind, a fire, or other peril, and your business is forced to shut down. Continue reading

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When Does Helping a Client Become Unethical?

insurance continuing educationIt’s important to realize that what is unethical may not always be illegal (though sometimes it is both). There are many instances where businesses may act within the law, but their actions hurt society and are generally considered to be unethical.

Let’s look at an example. Anne Jones is a newly licensed agent at the AB Insurance Agency who is given her own book of current business for renewals. She decides to introduce herself to each client to make sure that everyone renews with her. Her first stop is Mark and Mary Able’s apartment to renew their rental coverage.

The Ables tell Anne that they have purchased a house and are closing soon. Anne tells them, “You’ll need an HO-3 policy at your closing to show proof of insurance. I’ll be happy to provide that for you. The HO-3 form covers the house and everything in it on an all-risk basis, and it also includes $100,000 in personal liability coverage.”

Mark was anxious to finish the deal and move into the new house. “You mean it covers everything, Anne? But do we really need $100,000 in liability insurance? Isn’t that too much?”

“Yes; it’s all-risk.” Anne said. “$100,000 is the minimum we can write. I can provide the policy for your closing next week, but I’ll need a check for $520.00.”

Mark sighs and says, “I don’t get paid until the end of the month. I need money for the closing so I can’t write you a check today.”

Anne wanted to keep the business so she said, “How about writing me a deposit check for $100 and pay me the balance next month? I’ll pay the insurance company and deliver the HO-3 policy in time for your closing.”

Mark writes the check payable to Anne, who deposits it into her personal checking account. Anne writes a check to the insurance company for the annual premium (less commission) and delivers the policy as promised so the Able’s closing goes smoothly.

Has Anne Jones done anything illegal or unethical?

Anne’s enthusiasm has created some misjudgments in her sales approach and policy information. The HO-3 policy is an “open perils” form that contains certain exclusions and limitations on coverage. Although not a direct violation in many states, the extension of credit can be perceived as an inducement to purchase by offering an interest-free loan. Even if interest is charged, Anne’s offer to pay the premium can be considered rebating in many jurisdictions. Collected premiums and personal funds must be maintained in separate accounts. When Anne deposited the Able’s check into her personal account, she commingled funds, which is illegal.

Anne’s supervisor should not rein in Anne’s enthusiasm about selling insurance, but should direct it with some additional training by reminding her that commingling and rebating are violations of state law and that the contract is not “all-risk.” Anne must immediately correct the Able’s impression about what their policy covers and deposit funds into her agency’s Premium Fund Trust Account.

Want to know more about ethics?  Check out our ethics insurance continuing education classes.

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Your Insured Suffered a Loss: Now What Happens?

insurance continuing educationLet’s say one of your clients trips at work and is injured, or another one accidentally runs a red light and hits an oncoming car, or maybe a windstorm tears away part of someone’s roof, letting the rain and debris come into their home—what should they do?

As an insurance agent, you should explain that when your clients buy an insurance policy, they’re buying a promise from an insurance company: they’re paying a small amount of money to protect themselves, their family, or their business against a much larger loss. So what happens when that loss occurs? Although insurance policies can vary, the Duties After Loss clause in a policy tends to be fairly standard.

The Duties After a Loss clause specifies what a person must do in order to recover for losses covered by the policy. Most insurance companies have no duty to provide coverage unless there has been full compliance with the following duties: The insurer must be notified promptly of how, when, and where the accident or loss happened. Notice should also include the names and addresses of any injured persons or witnesses.

When you sell or renew an insurance policy, it’s a good idea to remind your clients that insurance is a two-way street when a loss occurs. Insureds must comply with the policy’s rules if they want the policy to provide coverage and the insurance company to pay for the loss.

Let’s look at a couple of examples.

  • Assume your insured is injured at work, what should he or she do first? An employee should notify a supervisor about the injury and the way in which it occurred, as soon as possible. An injured employee who fails to inform his or her employer, in writing, within 30 days after the date of the accident causing the injury, may lose the right to workers’ compensation benefits.
  • Assume your insured is involved in a car accident, what should he or she do first? If they have a cell phone, they should call 911 and ask for police assistance and, if needed, emergency medical personnel. If they think someone may be injured, they should request an ambulance. If there is any indication that your insured might be injured, recommend that they agree to be transported to the hospital by ambulance.
  • Assume your insured calls to say their part of their roof blew away and rain is coming in. The first step is to take all “reasonable” steps to protect the property from further damage. This could mean putting a tarp over the hole or maybe taking furnishings out of the room to protect them from further rain damage. However, it may not be reasonable to expect the insured to climb up on the roof, but a tarp over the furniture might prevent further damage.

Depending on the type of loss and type of insurance policy, the insured may have to take an inventory, notify the police, notify the insurance company promptly, provide specific details about the loss, and provide proof of loss. In all cases, the insurance company will expect the insured to cooperate while it is adjusting the loss. This means the insured must provide access to damaged property and may be required to assign subrogation rights to the insurance company. This means that the insurer assumes the right to pursue damages against the at-fault party, if people other than the insured are involved.

Want to know more about an insured’s duties after a loss? Check out our property and casualty insurance continuing education classes.

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Who Needs Personal Umbrella Insurance?

personal umbrella insurance

Having friends over for a few beers seems harmless enough—unless one of them drives off and gets into a serious accident. Then the insured may wind up in court. These days, the insured can be held liable for the damages that guests cause after the insured “allows them” to consume alcohol at the insured’s home and then “allows them” to drive. Some states have laws that mandate a host’s liability, much like a bartender’s liability. 

The insured could be responsible for the payment of medical bills, vehicle repair costs, lost time from work—and, in the worst case, claims for wrongful death that may result in huge monetary settlements. 

Does the insured have coverage for such a situation under a Personal Auto Policy or homeowners policy? Coverage will certainly be limited. 

Personal Umbrella Insurance 

Personal umbrella policies play a vital role in protecting against liabilities by providing broad coverage and high limits of coverage that most commonly sold personal liability coverages, known as underlying policies, do not provide. 

While homeowners or personal auto policies do provide coverage for their respective liability situations, often the limits aren’t high enough to cover all the damages that could be awarded in even a moderately severe case. In other words, if the policy has a $250,000 limit for automobile bodily injury and a court enters a judgment of $500,000, the insured will be responsible for the rest. 

In addition to extending home and auto (and other vehicle) insurance liability coverages, umbrella insurance also commonly covers an insured against the following causes of loss: 

  • property damage liability, 
  • landlord liability (for owner’s of rental units), 
  • bodily injury liability, 
  • libel/slander/defamation lawsuits, 
  • false arrest, 
  • malicious prosecution, 
  • violation of privacy rights, 
  • wrongful eviction or wrongful entry, and 
  • other types of lawsuits. 

Payment of defense costs, attorney fees and other expenses associated with the lawsuit, even if the lawsuit is groundless or frivolous in nature, may also be covered. The coverage of those costs and fees is in addition to the policy limits in most policies, but some insurers include it as part of the coverage limit. 

When a court hands down a liability judgment that exhausts the limits of the homeowners or automobile policy, the insured is responsible for the balance. This means the insured may have to sell his or her house, cash out IRAs or liquidate other assets in order to make the payment on the judgment. And, if assets are exhausted and the judgment is still not fully satisfied, the insured may have to dip into future earnings to pay the remainder of the outstanding judgment. One major liability case can wipe out the assets that took a lifetime to create. 

Want to know more about personal umbrella insurance? Check out our Advanced Thinking About Insurance continuing education classes. 

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